Adv

News

Without TPP, Development and Integration Still Continue

[Tuesday, 4-11-2017]

Moreover, Vietnam has an admirable foothold in footwear exports to the US. Despite being imposed average duty of 14.3 per cent since 2001, Vietnam’s footwear shipments to the US have increased 20-21 per cent a year on average. In 2016, Vietnamese footwear accounted for 19 per cent of value and 16 per cent of quantity of footwear imported by the US. Nike Inc., the largest US sports shoe maker, reported that its production output in Vietnam made up 30 per cent of its global output, while China and Indonesia respectively held 30 per cent and 25 per cent in 2013. Japan chose Vietnam to supply more than 30 per cent of its footwear demand.

Besides, Vietnam still has signed many free trade agreements (FTAs) and has favourable international business environment. Signing and deploying FTAs with South Korea, the Customs Union of Russia - Belarus - Kazakhstan, the ASEAN Economic Community (AEC) and the European Union (EU) have been, and will be, opening up new export opportunities for the Vietnamese leather and footwear industry, especially the sharp reduction of tariff barriers in the EU from current 12.4 per cent to 0-5 per cent. The AEC formation itself is expected to create further impetus for the Vietnamese leather and footwear industry. In fact, even Thailand, Vietnam, Indonesia and Cambodia are ASEAN member states with developed and similar leather and footwear industries, but Vietnam holds competitive advantages with abundant skilful workforce and low worker pay. Thus, it will be more likely to expand its presence in AEC. Besides, Vietnam can cooperate with other countries to develop input sources and shape new value chains to reduce investment rate, increase production capacity and supply output, slash input imports, enhance added values to products, and maintain competitiveness and market shares in major export markets such as the US, the EU and Japan.

In addition, Vietnam is negotiating the 15th round of Regional Comprehensive Economic Partnership (RCEP) Agreement with 10 ASEAN countries and six non-ASEAN countries, namely China, India, Japan, South Korea, Australia and New Zealand, which is likely to be concluded in mid-2017. Although the content and scope of this agreement is smaller than the TPP, once completed, it is expected to give a strong boost to Asian trade and stimulate investment in new supply chain and enhance the attractiveness of the region as a common production base.

It is clear that TPP negotiations in recent years have raised the perception of authorities, public officials, business owners, workers and the populace in integration. With an unprecedented reform scale and speed since 2013, Vietnam has passed 100 draft laws and is scheduled to ratify 30 other bills. As a result, the investment environment has improved markedly and is recognised by international organisations in their reports. A series of export-oriented businesses and industries such as footwear, seafood, furniture and apparel have actively boosted investment, reformed governance and restructured operations.

Notably, Vietnam’s leather and footwear industry is also aware of its weaknesses. It must strive to raise the local content in its products to over 50 per cent to meet conditions and origin rules in FTAs to which Vietnam is signatory, lower logistics costs and enhance initiatives of Vietnamese enterprises. Currently, the localisation ratio of the leather and footwear sector accounts for only around 40 per cent, mainly from unimportant items like shoe soles, threads and fabrics for low-grade canvas shoe production. Meanwhile, it has to import most machines and important materials for production such as high-end fabrics and artificial leather. Tanned leather imports were worth US$1.56 billion in 2016. In global footwear supply chains of world-leading brands such as Nike and Adidas, Vietnamese companies are operating as their offshore outsourcers with production orders assigned by foreign importers. Paradoxically, Vietnam is a major footwear producer and exporter, but its domestic firms are squeezed in both domestic and international markets. Vietnam now has about 800 footwear companies, of which FDI companies account for 23 per cent but contribute more than 80 per cent to export turnover.

The domestic market needs 180 million pairs of footwear worth US$ 5 billion a year and foreign businesses keep up to 60 per cent of market share. (China dominates the cheap segment while foreign brands control upmarket segment). Indeed, Vietnamese companies need to seek measures to deal with capital shortage, technology, senior human resources, governance, and low labour productivity, while attaching much importance to market research and analysis, quality standardisation, personnel training, production and supply chain formation to meet origin rules, requirements on quality, hygiene, labour and technology.

In short, the synergy of positive impacts of achievements and potential as well as efforts to change perceptions, institutional reforms and increased macro and microeconomic investment has enabled the Vietnamese economy in general and the leather and footwear industry in particular to continue to reform, develop and integrate more deeply and more sustainably into the world economy, regardless of having TPP or not.

With the support of the National Trade Promotion Programme 2017 of the Ministry of Industry and Trade, the Vietnam Leather, Footwear and Handbag Association (Lefaso) will chair a Leather and Footwear Export Promotion Conference 2017 with the theme of business and export capacity building for Vietnamese footwear businesses in Ho Chi Minh City on March 15, 2017.
More than 200 domestic and foreign footwear producers, exporters and leather material suppliers in Vietnam and foreign countries will gather to discuss issues of common concerns such as leather and footwear industry development planning in Vietnam and related policies; how Vietnam will change without TPP; leather and footwear investment environment assessment by Lefaso; impacts of FTAs and internal and external relations policies on Vietnamese leather and footwear industry; experience sharing and challenges in footwear factory construction investment in Vietnam and development plans; labour relations management in a labour-intensive industry - Practical research on footwear factories in Vietnam; social responsibility and sustainable development of footwear manufacturers and input suppliers for footwearproduction in Vietnam.The conference is an opportunity for Lefaso to promote the image and growth of the leather and footwear industry and enhance the prestige, position and influence of the industry and the Lefaso in Asia and around the world. Besides, this is a good opportunity for Vietnamese businesses to meet, exchange and acquire experience shared by domestic and foreign companies, initiate business contact with foreign importers, customers, peers and investors in the sector in order to promote export partnerships and introduce their capacities and capabilities.